Bill Yeates acquired the business Sun Supply Co. for $275,000 cash and assumed all liabilities at the date of acquisition. Suns books showed tangible assets of $250,000, liabilities of $10,000, and equity of $240,000. An appraiser assessed the fair market value of the tangible assets at $265,000 at the date of acquisition.

Required

a.

Compute the amount of goodwill purchased. (Amounts to be deducted should be indicated with minus sign.)

b.

Record the purchase in a financial statements model like the preceding one. Yeatess financial condition just prior to the acquisition is shown in the following statements model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity and NA to indicate the element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)